The fallout from the collapse of Silicon Valley Bank is only just beginning as Roku says it could lose $487 million in deposits. Roku released a filing on March 10 detailing how the FDIC has taken over SVB and that “all insured depositors of SVB will have full access to their funds no later than the morning of March 13. However, the company also said in its filing that “The Company’s deposits with SVB are largely uninsured,” and that, “At this time, the Company does not know to what extent the Company will be able to recover its cash on deposit at SVB.”
Meanwhile, the FDIC stated it “will pay uninsured depositors an advance dividend within the next week. Uninsured depositors will receive a receivership certificate for the remaining amount of their uninsured funds. As the FDIC sells the assets of SVB, future dividend payments may be made to uninsured depositors.”
From the Roku filing:
“The Company has total cash and cash equivalents of approximately $1.9 billion as of March 10, 2023. Approximately $487 million is held at SVB, which represents approximately 26% of the Company’s cash and cash equivalents balance as of March 10, 2023. Approximately $1.4 billion of the Company’s cash and cash equivalents is distributed across multiple large financial institutions. The Company’s deposits with SVB are largely uninsured. At this time, the Company does not know to what extent the Company will be able to recover its cash on deposit at SVB.
Notwithstanding the closure of SVB, the Company continues to believe that its existing cash and cash equivalents balance and cash flow from operations will be sufficient to meet its working capital, capital expenditures, and material cash requirements from known contractual obligations for the next twelve months and beyond.“
The aforementioned $487 million represents just over a quarter of the company’s total funds so the damage from those lost funds would likely be impactful to it and investors alike but the company issued a statement to Engadget saying that would not be so.
“As stated in our 8-K, we expect that Roku’s ability to operate and meet its contractual obligations will not be impacted and we continue to have access to $1.4 billion in cash and cash equivalents which are distributed across multiple, large financial institutions,” a Roku spokesperson said in a statement to Engadget.”
More Fallout
Despite that large number, Roku’s potential losses are a mere drop in the bucket compared to Roblox which reportedly had $3 billion in the bank but that is said only be about five percent of its cash. One other company, video streaming service provider Vimeo, said it had “less than $250,000” with SVB. Meanwhile, CNBC reported smaller companies have been left scrambling to pay bills and their employee’s payroll.
Discussion (4 replies)
Join Discussion →This SVB failure is kind of a big deal... the payroll company that I use happened to use SVB, so now there's no more direct deposit functionality available until they get a new bank installed. I'll probably have to do paper checks for at least one payroll cycle if they don't fix it early next week. There's also likely some impact for businesses that had payroll in flight via SVB at the time of closure -> to pay on say, Friday, funds will get pulled Tuesday, sit for 1-2 days in the payroll provider's account and then go out on Friday.
If this doesn't get cleaned up fast, the ripple effect is going to be ugly...
Yeah this could be the first domino in another 2008 style Armageddon. I hope not but it isn’t going to be without a lot of follow-on consequences.
I don't expect it to be a domino sort of situation. SVB is fairly unique in that it primarily services businesses and a lot of them are in the startup/VC world. With interest rates going sky high and VCers tightening the purse strings, it appears their model did not account for a sustained cash withdrawal rate.
That caused them to have to sell assets (loans) at a loss (because the value of a loans as assets is inversely related to interest rate). That's what caused the shortfall - then they caused a run on the bank by trying to raise 2B in equity to cover the loss.
Overall, if the assets aren't panic sold, everyone should be able to be made whole, but the disruption to businesses will be significant (see: my payroll situation). I would imagine the loosening of Dodd-Frank will get reversed and then some...
I do hope your right. Just worried about the follow-on effect of payrolls bouncing, lots of startups folding, and maybe even some bigger players taking big hits - that kind of stuff can easily start to snowball, particularly since Wall Street doesn't follow any kind of logic - it's all just gut check.
But I do hope it's just isolated. It could take down the rest of crypto while it's at it and I wouldn't mind too much.